American Waterfall Calculator

American waterfalls pay promote on each deal's profit, even if fund overall loses.

Deal profit

LP share %

Preferred accrued

Promote %

GP promote

$4,500,000

LP total

$20,500,000

Effective LP split

0.82%

How the math works

Pref split pro-rata. Remainder split by promote %.

$5M pref × 90% = $4.5M LP pref. $20M remainder × 80% = $16M LP profit. $20.5M LP total.

How to Use

Enter deal profit.
Enter LP share of deal.
Enter preferred return on deal.
Enter promote %.
Read distribution.

Frequently Asked Questions

American mechanics?

Each deal distributes independently. After capital return + pref, profit split by promote. GP captures promote on winning deals even if subsequent deals lose. LP protection via clawback (at end of fund).

Clawback?

End-of-fund calculation. If aggregate promote paid exceeds what European structure would pay, GP returns excess to LPs. Clawback enforced through escrow, letters of credit, or personal guarantees. Essential LP protection in American structures.

Tradeoffs?

GP-friendly: faster promote. LP-friendly: clawback. Hybrid: American with partial escrow. Institutional LPs increasingly demand European; syndicators in retail market still use American. Each has legitimate context.

How often should I rerun this?

Rerun this calculator whenever inputs change materially — new rent roll data, rate moves, loan balance updates, or quarterly operating data. For active deals, monthly refresh is typical. For stabilized assets under monitoring, quarterly is fine. Treat the output as a decision tool, not a one-time answer — market conditions evolve and so should your analysis.